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Brexit and Renewables in ScotlandUK Energy Research Centre policy brief by Nicola McEwen, Aileen McHarg, Fiona Munro, Paul Cairney, Karen Turner and Antonios Katris
October 2019
Executive SummaryThis briefing paper considers the extent to which renewables in Scotland are shaped by the policy responsibilities and
decisions of multiple governments: the Scottish Government, the UK Government and the EU.
Drawing on 12 interviews with representatives of industry and government, as well as a workshop bringing together
academics with key stakeholders, the paper explores the significance of EU membership in shaping Scottish renewables
and considers the likely effects of the UK’s exit from the EU.
Despite limited constitutional power, promoting renewables has been a key priority for successive Scottish Governments,
central to both its environmental and economic policies. While the main policy drivers rest with the UK Government,
stakeholders in Scotland place importance on the EU regulatory framework, EU funding and finance, multinational
cooperation and long-term strategic thinking in supporting the development of renewables in Scotland.
Our briefing identifies varying levels of concern among key stakeholders with regard to the impact that Brexit may have
on renewables in Scotland. Many expect policy continuity, irrespective of the UK-EU relationship. Others are fearful of the
uncertainty surrounding access to the EU internal market, access to project funding, access to labour and expertise, and
added costs and delays in supply chains in an industry heavily reliant on kit from the EU.
The biggest impact of Brexit to date has been the dominance of the issue on the political agenda, leaving little space for
policy development in other areas, including energy. In addition to the regulatory, financial and trade challenges it may
generate, Brexit has also reignited the debate on Scotland’s constitutional future, creating further uncertainties for the
future of renewables.
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Brexit and Renewables in Scotland
Renewables in a Multi-level Policy EnvironmentThe development of renewable energy in Scotland is
shaped by the policies, decisions and behaviour of policy
actors across multiple jurisdictions. Although the
ownership, exploitation, regulation, supply and taxation
of energy remains primarily a responsibility of the UK
Parliament and Government, the EU and the devolved
institutions have become important players in the field
(Table 1).
Before the Lisbon Treaty made energy a shared competence
of the EU and member states, EU influence was mainly via
internal market competition policy, environmental policy
and support for research and innovation. Since 2007,
the EU has developed a specific role in energy market
integration, energy security of supply, low carbon energy
and demand reduction, with continued influence via
indirect competences, including in relation to the
environment and market integration. This has enabled the
EU to extend its regulatory reach to promote the transition
to a low carbon economy, reduce energy demand and build
an EU Energy Union.
Following the introduction of devolution in 1999,
the energy competences of the devolved institutions
were limited mainly to the promotion of renewables and
energy efficiency, and consents for new electricity and
gas installations. More recently, the Scottish Parliament
acquired consenting powers for onshore oil and gas
licensing and schemes to alleviate fuel poverty (Thomas
and Ellis, 2017; Cairney, et al., 2019). Despite this relatively
limited constitutional competence, successive Scottish
Governments have put renewables at the heart of their
environmental and economic agendas, with increasingly
ambitious targets.
1
Table 1. Distribution of the Most Relevant Renewable Energy Competences
Level Direct competences Indirect competences
European
Union
Internal energy market
Promotion of renewable energy
Cross-border energy exchanges
Gas and electricity system operation
State aid regulation
Competition law
Trans-European networks
Innovation/R&D funding
Structural & strategic funding
EU Agencies Cross-border market integration and network
harmonisation (ACER)
United
Kingdom/
Great
Britain
Regulation of energy markets and networks
Licensing of energy producers, suppliers and
network operators
Energy security
Renewable energy subsidies/grants
Competition law
Intellectual property and commercial law
Climate change laws
R&D funding
UK/GB
Agencies
Gas and electricity market and network
regulation (Ofgem)
Competition law
Devolved Promotion of renewable energy
Electricity installations consents
Crown estate
Marine licensing and planning
Property law
Environmental Impact Assessment
Economic development
Local Land-use planning
Source: modified from the full energy policy table in Cairney et al (2019a: 460) and our Report 1
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Brexit and Renewables in Scotland2
Scottish leadership in renewablesThe 2017 Scottish Energy Strategy set a 2030 target of 50%
of the energy required for heat, transport and electricity
consumption to be supplied from renewable sources.
The targets are backed by a ‘whole systems’ energy
strategy (see Cairney et al., 2019b), a sympathetic planning
and consenting regime for onshore and offshore wind,
investment for renewables research and innovation to
boost marine renewables, support for community
renewables, and high-profile leadership from successive
First Ministers, especially under SNP administrations.
These policy ambitions have seen Scotland contribute
disproportionately to the growth in renewables in the UK,
and thus to UK efforts to meet EU renewables obligations.
By 2017, Scotland accounted for around a quarter of the
UK’s installed capacity of electricity generated from
renewable sources, including just under 40% of the UK’s
wind power (BEIS, 2018, Table 2). Generation output from
Scottish renewables also accounted for around a quarter
of the UK total, including 58% of total UK generation from
onshore wind (ibid, Table 3). Scotland’s disproportionate
contribution to the UK’s EU obligations in energy – even
more pronounced before the recent upsurge in offshore
wind in England – has in the past helped the Scottish
Government to punch above its constitutional weight in
energy policy, despite very limited devolved powers in this
field (see Figure 2).
Source: Scottish Government, 2017: 32
Figure 1: Scotland’s Energy Target
Source: BEIS, Renewable electricity in Scotland, Wales, Northern Ireland and the regions of England in 2017, p.76
Figure 2: Trends in capacity from renewables by country
THE EQUIVALENT OF
50% OF THE ENERGY
FOR SCOTLAND’S
HEAT, TRANSPORT
AND ELECTRICITY
CONSUMPTION TO
BE SUPPLIED FROM
RENEWABLE SOURCES
50%
AN INCREASE BY 30% IN THE PRODUCTIVITY
OF ENERGY USE ACROSS THE SCOTTISH
ECONOMY
+30%
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
50,000
55,000
60,000
65,000
70,000
GW
h
2003 2005 2007 2009 2011 2013 2015 2017
Engl
and
Scotla
nd
Wal
es
Nort
hern Ir
elan
d
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Brexit and Renewables in Scotland
Despite European integration and devolution, the UK
Government has continued to retain the main policy
drivers supporting investment in renewables, especially in
relation to regulations, obligations and incentives targeted
at the energy industry. Yet, these have been developed
within, and must be compliant with, the EU regulatory
environment. Electricity market reform (EMR) in the UK
has had to be compatible with EU Single Market legislation,
and the Commission’s new guidelines on state aid for
energy and environmental protection, as well as the wider
EU climate and energy framework. EMR introduced a
carbon price floor – a tax on fossil fuel generation – set
limits to power plant emissions, introduced a capacity
mechanism to ensure supply matched demand, and
replaced the Renewables Obligation with a new subsidy
regime of Contracts for Difference. The binding target
assigned by the EU Renewable Energy Directives – that 15%
of all UK energy demand (for heat, transport and power) be
sourced from renewables by 2020 – placed obligations on
the UK Government that incentivised a benign regulatory
environment for renewables generation across the UK.
The disproportionate contribution that Scottish renewables
had been making to efforts to meet the UK’s obligations
gave the Scottish Government some influence in the
intergovernmental arena, especially in relations with the
former Department for Energy and Climate Change
(Royles and McEwen, 2015). This helps to explain why
even big industry players invest as much time engaging
with the Scottish Government as with the UK Government.
An interviewee from one of the Big 6, noting the priority it
placed on onshore wind, told us that it saw the Scottish
Government as an ally in its call for changes to UK
Government policy on onshore wind.
The EU renewables funding landscapeThe industry in Scotland has benefited from the financial
incentives introduced by the EU. Over 40% of EU funding is
channelled through European Structural and Investment
Funds (ESI Funds), with around 25% of the total targeted
towards climate and low carbon energy projects. The Scottish
Government is the Managing Authority for two ESI funds –
the European Regional Development Fund (ERDF) and the
European Social Fund. These ESI funds represent a small,
but significant, proportion of the Scottish Government’s
budget, equating to €941million in the current EU budget
round (2014-2020) (Scottish Government, 2019). The ERDF,
in particular, has been used by the Scottish Government to
provide match funding to support schemes such as the Low
Carbon Travel and Transport Challenge and the Low Carbon
Infrastructure Transition Programme. More significant has
been the funding secured for low carbon research and
innovation from the Framework Programme/Horizon 2020,
which accounts for around a quarter of programme funds
in the current round. In addition, numerous energy projects
have been funded via Interreg, the various Territorial
Cooperation Programmes (e.g. Northern Periphery, Arctic,
Atlantic, North Sea, etc), the North West Europe programme,
and the Competitiveness and Innovation programme1.
Our interviewees noted the significance of this funding,
especially for new technologies and innovations, including
hydrogen and tidal and wave schemes, where risk premiums
are higher. In addition to the financial benefits, interviewees
emphasised how EU-funded research programmes have
fostered vital knowledge exchange and collaborative learning
and innovation as a result of the requirement for teams to be
drawn from multiple member states. As one interviewee
noted, partnerships with other countries help to ensure there
is collaboration and back-up to spread risk.
The European Investment Bank (EIB) has also helped to
finance large scale renewables projects in Scotland, acting
in particular as an early funder in large scale, high cost and
high-risk innovation projects. Typically, the EIB provides up
to 50% loan funding for new, often high risk, projects
supporting the EU’s strategic objectives. In 2015, the EIB
provided €13.8bn finance for energy projects, thought to
support roughly two-thirds of all European offshore
wind capacity. An example is the £525m loan toward the
construction of the Beatrice offshore wind farm 14km off
the coast of Caithness – then the largest single EIB loan for
an offshore project. Officially opened in July 2019,
Beatrice became Scotland’s largest single source of
renewable electricity, capable of powering 450,000 homes.
3
1 A full list of funded projects is available via the Scottish EU Funding Portal.
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Brexit and Renewables in Scotland4
UK and EU policy divergence?In its Annual Energy Statement, the Scottish Government
(2019a: 20) noted: ‘Legally-binding EU renewable energy and
energy efficiency targets have played a defining role in stimulating
the huge growth seen in Scottish renewable energy and in
generating significant inward investment’. Our interviewees
reinforced that view. In addition to the financial and
regulatory incentives identified above, they noted that the
EU represented a source of stability in the face of UK
instability. Whereas the EU had put in place long-term
goals, with legal obligations or targets assigned to member
states to help meet these, successive UK governments were
considered to be more sceptical of the value of binding
targets. In particular, interviewees were critical of what
they viewed as the short-term horizons and reactive
approach of UK energy policy. One interviewee at the
pioneering end of the renewables sector suggested that the
UK Government has never been keen on renewables and
never, acting independently, been pro-active in that space,
for example by promoting domestic supply chains.
Another noted that it puts most effort into engaging
with the Scottish Government and the EU as the UK
Government ‘just aren’t helpful’ and UK policy has
‘let us down’.
The future of onshore wind, in particular, has been
adversely affected by UK policy change, which saw
windfarm developers banned from competing for subsidies.
This change of policy direction has had a frustrating effect
on Scottish policy ambition. It has made it significantly
more difficult to bring to completion those onshore
windfarms that have already secured planning consent
within a favourable Scottish policy context. Figure 3 below
presents a visual manifestation of the significant gap in
consented projects and those under construction. Of the
1420 onshore turbines that have secured consent in
Scotland, with a combined capacity of 4GW, just 207,
with 0.5GW capacity, are under construction.
The equivalent figures for onshore wind in England are
147 consented turbines (0.186 GW capacity), of which
24 are under construction, with a combined capacity
of just 19MW (Renewables UK).
Figure 3: Onshore windfarms in Scotland, operational (blue), under construction (purple) and consented (red)
Source: Derived from Renewables UK, UKWED, 2019
Dots indicate windfarms, numbers correlate to number of sites, filled dots indicate a single site.
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Brexit and Renewables in Scotland
The impact of BrexitBrexit effects may potentially be felt across three domains
– the regulatory and policy frameworks governing
renewable energy; access to EU funding streams; and the
broader conditions of trade in energy and related goods
and services – but there is still considerable uncertainty
as to both the nature and scale of those effects (McHarg,
2017). Three years after the EU referendum, it remains
unclear whether and when the UK will exit the EU, when
EU law (including new rules such as the 2018 Renewable
Energy Directive)2 will cease to apply in the UK, what the
conditions of withdrawal will be, and what sort of
relationship the UK will have with the EU in future.
The draft Political Declaration accompanying the
Withdrawal Agreement negotiated by Theresa May’s
government suggested that the UK would no longer be
part of the Internal Energy Market (EU, 2019), but the
precise nature of the future relationship would be open
to negotiation, and political priorities may change. So far,
this prolonged uncertainty has been the major concrete
impact of Brexit, affecting the ability of renewable energy
businesses to plan with confidence.
Regulatory and Policy Frameworks
In principle, Brexit offers the opportunity to reform legal
rules and policies directly or indirectly governing the
deployment of renewable energy currently set at the EU
level, although there may in practice be little room for
manoeuvre if the UK remains closely aligned with the
Internal Energy Market.
Our interviewees anticipated relatively little change in this
area. In the short term, EU and EU-derived rules would
continue in force as ‘retained EU law’ under the European
Union (Withdrawal) Act 2018. A range of statutory
instruments have also been enacted to maintain the
operability and integrity of UK energy legislation, and to
ensure that the energy market can continue to function in
the event of a no-deal Brexit. No significant revision of the
allocation of energy policy-related competences between
the UK and devolved levels is envisaged, and some new
domestic common frameworks are likely in areas currently
governed by EU law, such as emissions trading and state
aids (Cabinet Office, 2019).
5
2 Directive 2018/2001/EU, OJ L328/82, 21 December 2018. The Directive becomes binding on Member States on 30 June 2021.
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Brexit and Renewables in Scotland6
In the longer term, interviewees also expect a reasonably
high degree of policy continuity despite the removal of EU
legal constraints. On the one hand, the UK is regarded as
having been a leader rather than a follower in the
development of EU climate and energy policy, especially
with respect to emissions reduction and market
integration. In addition, international climate
commitments and energy security demands will continue
to ensure the UK remains on a trajectory towards
decarbonisation. On the other hand, the revised Renewable
Energy Directive no longer imposes binding national
targets, and these had in any case not been sufficient to
prevent the UK Government withdrawing or reducing
financial support for renewables.
When pressed, some interviewees conceded that Brexit
might present an opportunity to revise the detail of
regulations that impose constraints on renewable energy
developments, such as state aid or environmental impact
assessment rules. However, one of the biggest perceived
downsides to the Brexit process so far has been to crowd
out the space for domestic policy development.
For instance, interviewees pointed to the repeated delays
in publication of the energy white paper and associated
legislation that had been expected in summer 2019.
In addition, some interviewees raised questions over the
impact the loss of UK influence could have upon the
development of EU energy policy. The absence of the UK
could create space for some other member states to push
an agenda that may weaken the EU’s commitment to a
renewables-friendly regulatory environment.
Funding
There was greater concern amongst our interviewees about
their ability to continue to secure research and investment
funding currently provided from EU sources. This was
particularly worrying for smaller companies and those
involved in more innovative technologies which are heavily
reliant on public funding, such as marine renewables or
hydrogen fuel cells.
If the UK leaves the EU with a deal, the transition period
during which the deal was implemented would ensure
continuity of funding at least until the end of 2020 (or the
end of the transition period). In the event of No Deal, the
UK Government has pledged to maintain project funding to
the end of the current funding round (the end of 2020), but
uncertainties surround what comes next. In any plausible
Brexit scenario, the UK would have third country status for
the purpose of access to European funds. As such, UK-
based projects could still participate in research and
innovation funding, but not as leaders. Several of our
interviewees reported that Brexit has already had an
impact in this area. For instance, Scottish companies have
been unable to act as project leads for grant applications,
some projects have not proceeded due to uncertainty, grant
applications have been cancelled by the European
Commission, and developers have been unable to secure
UK match funding for EU grants.
Particular concerns have also been raised about the lack of
UK support for wave and tidal projects, where risks and
costs remain high. Scotland is widely recognised for its
potential in marine renewables, though development has
so far fallen short of matching long-held ambition, despite
significant government support for demonstration sites
and research and development (see Hannon, et al, 2017).
One interviewee working in marine renewables expressed
frustration at the likely lost opportunity to capitalise on the
new EU Innovation Fund, a €10 billion fund generated from
Emissions Trading Scheme revenues to support the
demonstration of innovative low carbon technologies
within EU member states.
Market Conditions
Our interviewees expressed significant concern over
future trading conditions. Whilst there is no real risk
of being unable to access European markets even in a
No-Deal Brexit scenario, trade in both energy and related
products and services could become more difficult and
more expensive.
For example, trade in electricity over interconnectors is
likely to continue, but a loss of regulatory alignment could
reintroduce inefficiencies and so raise prices (see Geske
et al, 2018). Although the energy industry would not face
the challenges of those like the food industry, that operate
under ‘just-in-time’ supply chains, the import of
components for renewable energy projects may be slower
and more expensive due to tariffs and customs checks,
and it may also be more difficult to secure access to skilled
labour if (as is very likely) free movement of workers is
restricted. Equally, Scottish-based researchers and
developers may be less able to sell their knowledge-based
services overseas. There is also a lack of clarity about the
impact of Brexit on foreign investment in the UK.
While global energy firms are used to operating across
jurisdictional boundaries, the political uncertainty
surrounding Brexit may be a deterrent to firms who
have the option of investing elsewhere.
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Brexit and Renewables in Scotland
Renewable energy companies have differential capacities
to manage these risks. One interviewee from one of the
Big 6 noted that it had been stockpiling parts needed for
maintenance work as a hedge against the risk of disruption
to supply chains in the event of a no deal Brexit. Although
this hadn’t resulted in significant cost increases yet, he
envisaged that new tariffs would generate new costs that
would ultimately be borne by consumers. Others have
sought to diversify into areas that are less risky and do not
require so much government support. In addition, some
interviewees see potential opportunities, for instance,
to increase domestic inputs into renewable energy supply
chains or to diversify into non-EU markets as a result of
new trade deals. Regulatory change post-Brexit could also
make the UK a more attractive investment market than
other EU countries. However, such opportunities are
unlikely to emerge overnight, and none of our interviewees
considered these to outweigh the potential costs of Brexit.
ConclusionAll businesses dislike political uncertainty. However, it is
particularly problematic in a sector like renewable energy
which has high investment risk due to large capital costs
and long investment horizons. Nevertheless, within the
wider context of the global low carbon energy transition
with its attendant risks, Brexit is just one more uncertainty
on top of others; indeed, all of our interviewees pointed to
UK Government policy as a more palpable source of
uncertainty than the UK’s departure from the EU.
Although Brexit may slow down and/or increase the cost
of the transition to a low carbon energy system, it seems
unlikely by itself to bring about major changes in the
Scottish renewables sector.
Nevertheless, the political consequences of Brexit are
difficult to predict, and the future UK-EU relationship is not
the only uncertainty. Brexit has already revived debates on
Scottish independence, in light of the large majority in
Scotland who continue to support EU membership. A new
independence referendum that resulted in a vote for
Scottish independence, especially if followed by Scotland
acceding to the EU, could usher in a set of potentially more
fundamental challenges for the Scottish energy sector.
The Scottish Government’s prospectus in 2014 had
envisioned continuity of the GB energy market after
independence, and a strategic energy partnership
between the Scottish and UK governments. That would
be considerably more difficult in the context of Brexit,
especially if the UK leaves the EU internal energy market.
9
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About UKERC The UK Energy Research Centre (UKERC) carries out world-class, interdisciplinary research into sustainable future energy systems. It is a focal point of UK energy research and a gateway between the UK and the international energy research communities. Our whole systems research informs UK policy development and research strategy. UKERC is funded by the UK Research and Innovation Energy Programme.
Brexit and Renewables in Scotland
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Scottish Government, 2019b, European Structural and
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About the authorsProfessor Nicola McEwen, Co-Director of the Centre
on Constitutional Change, University of Edinburgh
Professor Aileen McHarg, University of Durham
Dr Fiona Munro, University of Stirling
Professor Paul Cairney, University of Stirling
Professor Karen Turner, Director of the Centre for
Energy Policy, University of Strathclyde
Dr Antonios Katris, University of Strathclyde
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Thank youThis project was undertaken as part of the UK Energy Research Centre programme, funded by the UK Research and
Innovation Energy Programme.